The Medium-Term Debt Management Strategy: An Assessment of Recent Capacity Building

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This report to the Boards of the International Monetary Fund (IMF) and the World Bank (WB) is the third in a series regarding the evolution of the Medium-Term Debt Management Strategy (MTDS) framework and the associated capacity building efforts.
In 2007 the two Boards endorsed the development of the MTDS and ancillary tools, and mandated a program of technical assistance to help countries build capacity in this area.
Rationale: sound debt management is critical to macroeconomic stability and to the development and functioning of the financial sector.

Delivery modes:
- Country visits by staff and experts.
- Regional training events.
- Organization of forums.
Evolving emphasis:
- Greater tailoring to country circumstances and ownership.
- Improved coordination within and across agencies in recipient countries.
- Move from one-off missions toward sustained streams of support, which often produced better results.
Complementary reforms and linkages:
- Strengthening of institutions and governance arrangements.
- Improvements in debt recording and government cash management.
- Strengthened linkages with annual borrowing plans (ABP) and debt sustainability analysis (DSA), though more work is needed.
Client focus:
- Primary focus on middle- and lower-income countries.
- Donor support recognized as generous.

Documentation methods:
- Qualitative and quantitative metrics.
- Responses from national authorities to a questionnaire on MTDS technical assistance.
- Case studies showing tailoring to country needs.
Reported benefits:
- Majority of recipient countries indicated technical assistance helped introduce a structured and coherent approach to designing a debt management strategy (DMS).
- Assistance raised awareness of risks among senior officials and broader stakeholders.
- Countries appreciated advice on institutional and governance reforms and on integrating debt management into macroeconomic policy formulation and implementation.
- Many recipient countries are now better able to integrate debt management into overall economic policy and adapt DMS to changing country circumstances.
- For some countries, risk exposure indicators have improved even as debt levels have increased.

Changes in country circumstances:
- Increasing market access (for example, issuance of Eurobonds or local currency bonds).
- Potential realization of contingent claims.
Implications for MTDS:
- Need to consider additional risk factors.
- Need for more diverse scenarios and market risk metrics.
- Need for a wider range of strategies.
Capacity spectrum:
- Some countries will require more sophisticated techniques to analyze cost-risk trade-offs and to implement chosen strategies.
- Others remain in the process of building a solid foundation for debt management.
Delivery innovations:
- In addition to hands-on trainings, greater use of on-line learning may enhance effectiveness and efficiency.
- Building institutional capacity is a long-term endeavor that often requires a programmatic approach: diagnosis followed by an actionable reform plan supported by tailored technical assistance.

The Boards are asked for their views on:
- Priorities in a strategy for future development of capacity building in MTDS.
- How best to ensure that improvements in debt management are sustained.
Critical factors for sustained enhancement:
- Country ownership, often reflected in commitments under IMF- or WB-supported programs.
- Sustained client ownership and programmatic, sustained support rather than one-off interventions.

The Medium-Term Debt Management Strategy: An Assessment of Recent Capacity Building, July 28, 2017.